MONTGOMERY, Alabama --- The Retirement Systems of Alabama is trying to stop retirees from improperly claiming to be independent contractors so they can draw a paycheck and their pensions at the same time, officials say.

Under state law, if an RSA retiree goes to work for a state or local agency, school system, college or other employer that is part of the RSA, the retiree’s pension payments are suspended while he or she is working.

Exceptions are allowed. An RSA retiree can work part-time for an RSA employer and not have his pension suspended if his pay stays under a cap. The cap, tied to the consumer price index, is now $23,000.

The cap and pension suspension does not apply to retirees who work for RSA employers as independent contractors.

But RSA Chief Executive Officer David Bronner said some retirees who are using the contractor exception aren’t really independent contractors.

Bronner gave an example of one retiree working for a university who presented RSA a document to show he was a contractor.

“He came in here to show us his contract with the university and it was not a contract at all, but a simple invoice,” Bronner said.

Bronner said some retirees “set up a drop box and call themselves a company.”

Canary wrote that some retirees have entered “sham independent contractor relationships with participating employers.”

“Stated plainly, these violations are a form of pension fraud and cause a financial drain on your retirement system,” Canary wrote. “This is not fair to the majority of law-abiding retirees.”

In April, the Alabama attorney general’s office issued an opinion saying the boards that govern the RSA have the authority to set rules to determine who is an independent contractor. Canary said the RSA uses a 20-factor test established by the Internal Revenue Service to distinguish an independent contractor and an employee.

The attorney general's opinion came in response to questions from Bronner.

The opinion also said that RSA employers must report to the RSA the names of retirees they employ so the RSA can determine whether they are contractors or employees who are subject to the pension suspension rule.

Canary said the RSA sent out notices to RSA employers and to retirees about the issue and is gathering information. About 1,200 entities are RSA employers. Canary said they have been asked for names and supporting documents for those working as contractors.

Canary said some retirees have also self-reported.

Bronner and Canary said they don’t know how widespread the use of the contractor exception is.

“It will be a while, probably a number of months, before we really pin it down to exactly how many people we’ve got that we think are really abusing the system,” Bronner said.